TaxTMI 
TaxTMI 
2019 (9) TMI 1442
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.... IBC etc. 2. Brief facts of the case, as mentioned in the Application, which are relevant to the issue in question, are as follows: (1) Initially C.P(IB) No. 68/BB/2018 is filed by Saravana Distributors (Operational Creditor) under Section 9 of IBC, 2016 R/w Rule 6 of I&B(AAA) Rules, 2016, by inter alia seeking to initiate CIRP in respect of M/s. Seotts Garments Ltd. (Corporate Debtor) on the ground that it has committed a default for total amount of Rs. 11,95,865/- along with interest. The case was admitted by this Adjudicating Authority, vide order dated 13.08.2019, by inter alia appointing Mr. N. Siva Kumar as the Interim Resolution Professional and imposed moratorium etc. Subsequently the Adjudicating Authority replaced Mr. N. Siva Kumar with Mr. Radhakrishnan Dharmarojan (i.e. Respondent No. 2) as the RP. (2) The Applicant Nos. 1 and 2 are Financial Creditors of the Respondent No. 1 Company, and are part of the CoC. The Applicant No. 1 has given a loan of Rs. 101,29,00,000/- to the Respondent Company. The Applicant No. 2 has given a loan of Rs. 37,76,41,663/- to the Respondent No. 1 Company. Totally, Respondent No. 1 Company has borrowed a sum of Rs. 567,04,00,000/- from ....
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....ect bearing on the voting share of the financial creditor. Any change in the voting share or the financial debt also has a direct effect on the resolution payment that a Financial Creditor will receive. (5) It is stated that in the 13th Meetings of the CoC which was held on 24.07.2019, a revised Resolution Plan was placed before the CoC by the Resolution Professional with changes which were neither discussed nor approved by the CoC in its earlier meetings. The following was the change in the entitlement of the following secured Financial Creditors: Banks Claims Admitted % sharing Payment out of Rs. 160 Crores Payment Additional Interest @10% Total (Crs) Canara bank 426.47 81.83% 130.93 13.85 144.78 SBI (i.e. Applicant No. 1) 101.29 13. 24 % 21.18 2.24 23.42 IDBI (i.e. Applicant No. 2) 37.76 4.93% 7.89 0.83 8.72 Total 562.52* 100 % 160.00 16.92 176.92 This does not include unsecured loan of Rs. 1.52 Crore of Promoters. (6) It is stated that the Revised Resolution plan, the payment that was to be made towards the principal of the loan given by the Applicant No. 1 was reduced from Rs. 28,66....
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....he differentials in allocation proposed within the same class of Financial Creditors, he is leaving the decision to the CoC to decide and thus he is not rejecting the plan and allowing the revised plan to be put for voting." (9) Absolutely no basis or formula has been provided in the Revised Resolution Plan to show as to how they have arrived as the reduced amount to be paid to Applicants. Form the Revised Resolution Plan, it appears that the Resolution Applicant without providing any basis has reduced the voting share of the Applicant No. 1 from 17.9% to 13.23% and that of Applicant No. 2 from 6.7% to 4.93%. The act of the Resolution Applicant is arbitrary and order of the Resolution Professional condoning and accepting such an arbitrary reduction in the share of the Applicant is illegal and therefore the same is liable to be set aside. (10) It is stated that the impugned order passed by the Resolution Professional to the extent that there have been no violations in relation to the IBC or the Regulations framed under the IBC is erroneous. As per Section 21(3) and Section 24(6) of the IBC, the voting share of the Financial Creditor is determined on the basis of the financial de....
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....reason that the Resolution Professional has accepted such a Revised Resolution Plan is due to the time crunch that the Resolution Professional has recorded in the minutes. However, this goes against the very basic notions of law and against the principles of natural justice. Therefore, the Impugned order passed by the Resolution Professional overruling the objections raised by the Applicant regarding the reduction of the Resolution payment is absolutely illegal and deserves to be set aside. 3. Shri Radhakrishnan Dharmarajan, Resolution Professional/2nd Respondent, has filed a Reply on his behalf dated 12.09.2019, by inter alia contending as follows: 1) It is stated that the Resolution plan in question has been approved by the Committee of Creditors ("CoC") and has passed muster before the Adjudicating Authority, this determination can only be challenged before the Appellate Authority under Section 61 of the Code and may further be challenged before the Supreme Court under Section 62 of the IBC, if there is a question of law arising out of such order, within the time specified in Section 62. Section 64 of the IBC also makes it clear that the timelines that are to be adhered to by....
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....g the Financial creditor as mentioned therein. In other words, the Resolution Applicant has allocated Rs. 130.93 Crores for Canara Bank, Rs. 21.18 Crores for State Bank of India and Rs. 7.89 Crores for IDBI Bank Ltd. Applicant has made baseless allegation against alleged reduced share holding and the Resolution Applicant has not reduced the voting share of the Applicants and the voting share was crystallized by the IRP much earlier. There is no change in the voting share of the members of the CoC and the allegations in this regard are baseless and liable to be rejected. 5) The Hon'ble Supreme Court, in its Judgment in Swiss Ribbons case, has clearly held that the Resolution Professional does not perform an adjudicatory role and therefore the question of challenging the so-called impugned order of the Resolution Professional does not arise. The fact remains that the RP, after having satisfied himself with the plan submitted by the Resolution Applicant in conformity with the provisions of the IBC and the Regulations and accordingly placed it before the CoC. The Hon'ble NCLAT in the matter of Essar Steel vs. Satish Kumar Gupta had also held that the CoC are not empowered to ....
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....This would mean that the factual position of this Respondent ruling majority remains unquestionable and the above application is a futile one. It is stated that Applicants cannot take advantage of discrepancies on account of in advertent errors and that this Respondent being a Public Sector bank, a sum of Rs. 52.81 Crores cannot be wished away. 3) The allegation that the issue was not discussed is denied as false and reference of this Tribunal is drawn to Annexure E being the minutes of the 13th CoC meeting @ page 265. It is stated that the Respondent submits that there is no preferential treatment among the secured creditors as in so far as the sum of Rs. 52.81 Crores having exclusive charge over the fixed assets of the Corporate Debtor. On the contrary, the other secured creditors do not have exclusive charge over the assets of the Corporate Debtor. Hence, after claim against the exclusive charge of Rs. 52.81 Crores, the residual secured credit, including those of this Respondent the applicants herein have been arrived at pari passu. Hence, there is no discrimination as alleged by the Applicants. It is also stated that in the event of Liquidation of the Corporate Debtor, the Ap....
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.... realized and to the secured creditor and apply the proceeds to recover the debts due to it. As per Proviso 7 of the Section 52 of the Code, says that security interest as mentioned in Section 53(4) yields an amount in excess of the debt due to secured creditors, such secured creditor shall account to the Liquidator for such surplus etc. In the instant case, as pointed out by Canara Bank in their reply dated 12.09.2019 as briefly stated supra, Canara Bank is having exclusive/first charges for an amount of Rs. 52.81 Crores over the fixed assets of the Corporate Debtor, and admittedly, the other Secured Creditors ("the Applicants herein") do not have such exclusive charge to claim on par with Canara Bank. It is not in dispute that except to allow the claim of Canara Bank for its first charge for the Term Loan in questing, all Financial Creditors are treated as a class following the principle of pari passu charge over the properties of Corporate Debtor. Therefore, there is no illegality or discrimination or violation of the Code or the Rules made there under as alleged. The Applicants have failed to point out that how they are prejudiced with the modified Resolution Plan. 8. The cont....
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....nd also distributed the earmarked amount for Financial Creditors of Rs. 160.00/- Crores among 3(three) Financial Creditors, namely, Canara Bank (Rs. 130.93/- Crores), State Bank of India (Rs. 21.18/- Crores) and IDBI Bank (Rs. 7.89/- Crores). Therefore, final meeting of the CoC (i.e. 13th) held on 24th July, 2019 as inter alia recorded as follows: ''Resolution Plan for discussion and voting The Resolution Professional informed the CoC Members that the revised Resolution Plan from Lenin Art Private limited which was already circulated to the members is being put up for final discussions and voting platform is open till Friday 26.07.2019. The CoC members discussed the plan and raised the following issues; * CoC representatives from State Bank of India and IDBI raised objections on the changes in the resolution amount payable between the Financial Creditors, whereby the revised plan envisaged additional payments to Canara Bank for having exclusive charge on a term loan. SBI and IDBI representatives argued that there should no preferential treatment within the same class of creditors and that is not in the best interest of the IBC and Regulations and registered their disp....